Author Sarah Zielinski discusses the major problem with solar and wind-generated electricity: relying on it puts you at the mercy of weather and daylight. However, scientists Zielinski interviewed say the real problem is distribution. The wind is always blowing somewhere. We can’t harness it all because we lack the ability to move electricity efficiently across long distances.

According to scientists’ computer models, the US could reduce its carbon emissions up to 78% below 1990 levels by switching to mostly wind and solar energy and modernizing the electric grid’s architecture. We would still need natural gas and hydroelectric and nuclear power for times when the weather was uncooperative, but the need for them would be sharply lower.

This particular study might or might not be flawed; but the point is that oil, gas, and coal face serious competition from other energy sources. Meeting electricity demand with renewable sources might be closer than we think. That still leaves transportation, though.

Morocco has just commissioned a monster solar farm. NPR linked to a Guardian story with some cost numbers.

Quick math: The full Morocco project will cost $9 billion and will generate 580 megawatts. The Solar Energy Industries Association (SEIA) says one megawatt can power 164 homes on average. So 164 homes x 580 MW = 95,120 homes. Divide by $9 billion, and the cost per home is $94,617. Amortized over 20 years, the cost is $394 per home, per month. A tad high, but you also have no carbon emissions and no exposure to oil prices.

Now throw in inflation over the 20 years, and $394 a month for the final 10 of those years will probably not be nearly as high a real cost as it is today. I’ve thought for some time that solar will beat fossil fuels strictly on cost at some point. Current research data says that even without subsidies solar could be cost-effective in many locations in 10 to 15 years. This article suggests we are getting much closer. That’s bad news for conventional energy companies and OPEC. 

Electric car technology is advancing quickly, too. Tesla, among other companies, has shown that the technology works; their constraint now is building efficient batteries fast enough. Fuel cell and other technologies are on the near horizon, too.

None of this means the world will stop needing oil and natural gas any time soon. Nevertheless, it tells me that potential oil supply could outweigh oil demand for a long time. If so, all that oil in the ground will be slow to regain those trillions in lost value, if it regains it at all.

I’m in a hedge fund conference in the Cayman Islands today. I was talking with some rather large (think tens of billions) managers last night. When you look at the really long term, as in 40–50 years, these guys think the price of oil goes to almost nothing, as we will have so many substitutes for fossil fuels, and we’ll find lots of oil that can be brought up for not all that much money.

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